Taxpayers worked 149 days for HMRC this year, today is the first day they start working for themselves
Tax Freedom Day falls on May 30th; the latest it's been since 1995
Brits work 149 days of the year solely to pay taxes
UK Taxpayers will fork out over £734.1bn to the Treasury this year, 40.94% of net national income
Cost of Government Day, which factors in borrowing as well taxes is the earliest it has been since 2008. The UK is successfully bringing down the deficit, but spending is still too high.
With tax demands at record highs, Tory leadership contenders that want growth in the economy and people’s wages need to come up with ways to reduce, not increase, the national tax burden.
Top Conservatives back ASI call to cut tax burden for ordinary Britons and ensure Tax Freedom Day comes earlier in 2020.
Tax Freedom Day is a measure of when Britons stop paying tax and start putting their earnings into their own pocket. In 2019, the Adam Smith Institute has estimated that every penny the average person earned for working up to and including May 29th went to the taxman—from May 30th onwards they are finally earning for themselves.
British taxpayers have worked a gruelling 149 days for the taxpayers this year. That’s more than at any time since 1995. Conservatives under Theresa May have seen the tax burden go in the wrong direction, and now the free market think tank the Adam Smith Institute is calling on leadership contenders to commit to reducing the tax burden, as Director Dr Eamonn Butler launches his new book 'The Street-wise guide to the British Economy'.
The Adam Smith Institute’s call for lower taxes is joined by Tory Big Beasts Sir John Redwood, Steve Baker, and Priti Patel who argues that the Conservative Party needs “leadership that will radically attack the tax burden.”
Conservative leadership candidate Sajid Javid stated that “simpler, flatter, lower taxes” should be a priority for the government and that they both “good economic sense” and are “also the right thing to do.”
Esther McVey, also running for leadership of the Tory party says that “higher tax bills hit the least well-off families the hardest and it is dispiriting for hard-working taxpayers to have to work right up until the start of June just to pay their yearly tax bill.”
Government spending choices fall on UK Taxpayers, and this year to try and meet these commitments taxpayers will fork out £734.1bn—representing 40.94% of net national income.
The ONS has revised net national income data and the Adam Smith Institute has calculated this means Tax Freedom Day is later than any day since reliable records began in 1995. The shortest number of days worked to meet HMRC’s tax demands was 122 in 1996.
In a sign of good news though, Cost of Government Day this year falls on 18th June with the smallest gap after Tax Freedom Day in over a decade. The Cost of Government Day calculates spending over net national income—i.e. including debt-financed government activity, which we must eventually pay, as well as tax-financed government spending.
While it’s good news that the gap is getting smaller, the money borrowed to cover the near three week long gap since Tax Freedom Day must eventually be paid off with future taxes.
With squeezed budgets, low wage growth, inflation above target and high housing costs, UK taxpayers cannot afford budget proposals from Left or Right that attempt to squeeze more money from taxpayers. Instead politicians should look at reducing the size of the state, and reforming our taxes. With a change of premiership the Adam Smith Institute argues that it’s time for the Conservatives to again become a party that again commits to a lower tax burden.
The Adam Smith Institute singles out three tax changes that would boost growth and the pay packets of Britons right across the country:
UK Government should move to take the poorest out of tax altogether. With budgets tight across the government should boost the take home pay of minimum wage workers by raising the National Insurance Contribution threshold in line with that of income tax.
Governments across the UK should abolish stamp duty (in Scotland the Land and Buildings Transaction Tax). Britain’s most damaging tax, Stamp Duty destroys 75p of wealth for every pound raised. The Government should prioritise cutting the taxes that do the most harm.
Slash corporation tax to no more than 12.5% to induce job creation and higher wage growth.
Rt Hon Sajid Javid MP said:
“A low tax burden is not only essential to help grow the economy, which provides the tax base for public spending, but it is also morally right that workers get to keep the maximum possible amount of their earnings. It is noticeable that the increase in income tax under Gordon Brown led to a reduction in revenues, as did the recent Stamp Duty rises. Simpler, flatter, lower taxes should be a priority for any government. Not only does it make good economic sense, but it is also the right thing to do.”
Rt Hon Esther McVey MP:
“With the tax burden now at its highest in almost 50 years, we must do everything we can to get rates down.
“Higher tax bills hit the least well-off families the hardest and it is dispiriting for hard-working taxpayers to have to work right up until the start of June just to pay their yearly tax bill.
“Allowing hard-working taxpayers to keep more of their hard-earned money will show that the Conservative Party is firmly on their side and will generate economic growth, higher wages and more jobs."
Rt Hon Priti Patel MP said:
“It is shocking to see that under a Conservative Government Tax Freedom Day keeps getting later as the tax burden rises to its highest level in a generation. A high tax economy hits people hard in their pockets, strangles economic growth and prevents investment in job-creating enterprises. People should not be working for nearly five full months to pay taxes. We need to see new Conservative leadership that will radically attack the tax burden, reduce complexity in the tax system and free families and businesses so they can keep more of what they earn.”
Sir John Redwood MP said:
“Better late than never. Tax Freedom Day should be brought forward. If we had lower tax rates the economy would grow faster and we could pay for our public services more easily. Taxes like Stamp Duty, Capital Gains and Higher Rate Income Tax are now at levels which mean the Treasury collects less revenue than if the rates were lower.”
Dr Eamonn Butler, Founder and Director of the Adam Smith Institute, said:
“If we were forced to spend 40% of our time working for the government, people would regard it as the most tyrannical slavery. But that is exactly what people in Britain have to do. And when they see what their forced labour goes on—the overspending on HS2, the dismal bureaucracy, the daily pantomimes in Parliament—they are quite understandably annoyed.
Taxes of 40% make working for a living pretty pointless. That’s why economists are clear that tax takes over 15% actually damage economic growth. And with less growth, there is less money to fund the essential services that are really needed.”
John O'Connell, chief executive of the TaxPayers' Alliance.
“It’s demoralising to think we spend so long each year working for politicians. It's even worse to think just how much of that hard-earned cash is wasted. We hope the Adam Smith institute will report an earlier Tax Freedom Day next year, as it might mean that Britain is becoming a more pro-enterprise country with lower, simpler taxes funding better public services.”
Mark Littlewood, Director of the Institute of Economic Affairs, said:
“We are almost half-way through the year and it is only now that UK workers are finally working for themselves, not the taxman. Tax Freedom Day demonstrates how heavy the tax burden is in this country with high income tax rates, national insurance payments and draconian VAT and stealth taxes, including the newly introduced levy on sugar.
“While the Government has brought the budget deficit down, for all the talk of austerity, progress is still too slow. Reductions in public spending to relieve workers of the burden they are saddled with will allow them to spend more of what they earn, thus providing the economic boost this country needs.”
Notes to editors:
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